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SYSTEM, L.P.
Pipeline Interconnects:
TransCanada
Dominion
Tennessee (200 and 300 lines)
Algonquin
DEMAND Pull
Iroquois Flow Reversal Expansion
55,000 Dth/d exported to Canada
Electric Generation
Cricket Valley, 1000 MW
PSEG Harbor Station, 460 MW
Constitution / Wright Interconnect Project
Capacity = 650 MDt/d
Easily expandable to ~ 1,300 MDt/d
Status = Federal Courts
In-Service Date = 3Q/4Q 2018,
originally March 2015 (a 3 year delay)
Dominion Projects
New Market Project
Capacity = 84 MDt/d
Status = Permitting
In-Service Date = Nov 2018
Ruth E. Leistensnider
Nixon Peabody LLP
Attorneys for Xpress Natural Gas LLC
677 Broadway, 10 th Floor
Albany, New York 12207
rleistensnider(a@nixonpeabod .
(518) 427-2650
14804380.11
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
(16 NYCRR Part 8), petitioner Xpress Natural Gas LLC ("XNG") hereby petitions the
Commission for a declaratory ruling that XNG's proposed siting and operation of a compressed
natural gas ("CNG") fueling station (the "Facility"), and associated connection facilities at
customer locations throughout the State, will not be subject to the Commission's jurisdiction.
The proposed location for the Facility is Route 167 in Manheim, New York, a state
highway with proximity to the New York State Thruway and potential customers to the north of
the Facility. The Iroquois pipeline runs through the site location via an easement with the
existing property owner, and a mainline valve is also located on the property. This location thus
provides XNG with direct access to a source of natural gas for the Facility that does not require
The operation consists of drawing natural gas from the Iroquois pipeline, conditioning it
to remove excess moisture, compressing it and loading it into trailers specially designed for the
safe and efficient transport of CNG. The trailers will then deliver the CNG to customer sites
throughout the northeast. XNG's customers are likely to be large industrial facilities or public
institutions with significant power and/or heating needs, such as paper mills, hospitals, prisons,
14804380.11
and colleges or universities. XNG also expects to provide supply services to certain local
distribution companies ("LDC"), and already has a preliminary agreement in place with one such
LDC in upstate New York. XNG will not provide service directly to residential customers.
XNG's preliminary agreement with the LDC requires XNG to begin providing gas supply
services to the LDC in the 2014-2015 heating season. In order to ensure that construction can
begin soon enough to satisfy that agreement, XNG respectfully requests an expedited review of
this petition and the prompt issuance of a declaratory ruling that XNG's services are not within
I. BACKGROUND
A. Petitioner ]
XNG is the leading provider of truck-transported compressed natural gas and liquefied
natural gas solutions to industrial and commercial businesses in the northeastern United States
and Canadian Maritimes. In the last 18 months, XNG has delivered over 4 Bcf of natural gas to
customers in the U.S. and Canada. XNG and its affiliates own and operate two CNG fueling
stations in Maine which are of the same design as the proposed Facility. The station in
Baileyville, Maine went through a detailed design and safety review and was ultimately
approved by the Maine Public Utilities Commission ("Maine PUC") (see Attachment 1).
B. Proposed Facility
The Facility will be very similar to XNG's two other stations in Maine. Equipment to be
installed will consist of (a) a metering station and pipeline extension built to Iroquois safety and
XNG recently entered into a joint venture agreement with Direct Energy, which acquired Hess Direct Marketing
in 2013. Direct Energy is one of the largest commercial retail energy suppliers in North America. In business
for more than 25 years, it supplies electricity and natural gas to customers in 14 states, the District of Columbia
and five Canadian provinces. In 2012, Direct Energy supplied 68 Bcf of natural gas and 51 TWh of power to
customers. It is expected that a joint venture entity created by XNG and Direct Energy will ultimately become
the owner and operator of the Facility, but XNG currently remains the Facility's primary developer.
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design specifications, (b) a double tower desiccant dryer system (manufactured by PSB
Industries) to remove water from gas in preparation for compression (see Attachment 2),
(c) 2-4 300 hp electric powered compressors (manufactured by Ariel) in parallel which will build
pressure to 4,000 psi (see Attachment 3), (d) a cooling system to accelerate filling times in
warmer conditions, and (e) up to four dispensing stations for filling trailers. The trailers will be
designed specifically for the transport and storage of CNG (see Attachment 4). The trailers
contain four storage tubes configured in a standard 43' intermodal trailer. They are inspected
and approved for operation by DOT. XNG has required Hexagon to incorporate an additional
safety feature on the trailers, specifically an interlock on the trailer's rear wheels to prevent them
C. Daughter Stations
Following completion of the filling process at the Facility, the trailers will transport the
CNG to customer locations where the CNG will be off-loaded for customer use. Trailers remain
at the site throughout the off-loading process, which can take anywhere from one to three days,
depending upon customer burn rates. All trailers will be owned by XNG.
fabricated by XNG at its manufacturing facility in Dover, New Hampshire, and consists of
connection equipment, a decompression skid, heaters, controls, and a meter. XNG owns the
equipment before the meter, and the customer owns the equipment beyond the meter. Equipment
installed by XNG is installed aboveground. The customer's equipment beyond the meter may be
underground, but the vast majority of XNG's customers' equipment is currently aboveground.
14804380.11
D. Safety Standards
1. Compression Station
applicable to the Facility, NFPA 52, Vehicular Gaseous Fuel Systems Code, provides regulatory
standards for facilities that compress natural gas and dispense CNG into vehicles for use as
transportation fuel. XNG based the design of its two stations in Maine on this standard,
supplemented by certain provisions of 49 CFR 192 (Federal safety standards for natural gas
pipelines), which was satisfactory with the Maine PUC for purposes of its analysis of XNG's
Baileyville facility.
The Facility will comply with the applicable requirements of NFPA 52 Chapters 5 and 7,
as follows:
o The tanks supplied by Hexagon Lincoln are DOT approved and will
therefore comply with Section 5.4 (design and construction of containers);
o Pressure gauges will have the capacity to indicate greater than 1.2 times
the system design pressure as required by Section 5.6 (pressure gauges);
o The CNG facility will be constructed with piping and fittings compatible
with natural gas and wherever possible has been designed to a three times
safety factor to comply with Section 5.8 (fuel lines). All piping and
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fabrication will be done to ANSI/ASME B31.3 standards, and components
prohibited from use in CNG systems will not be used;
o All hoses will have at least a four times burst pressure and will be OEM
tested to two times service pressure and comply with other requirements
of Section 5.10;
o The CNG Facility's dryer system will eliminate internal icing and
minimize hydrate formation and external icing will be minimized by
process design, all in compliance with Section 7.3.3;
o Fueling connections will prevent the escape of gas when not engaged or if
it should become separated from the tank while fueling in compliance with
Section 7.3.5;
14804380.1I
o The Facility's emergency shutdown system has been designed and will be
installed in compliance with Section 7.11 (installation of emergency
shutdown equipment) to the extent possible for this non-vehicle fueling
application:
2. Daughter Stations
As with the Facility, there are no NFPA codes that directly apply to the equipment to be
installed at XNG's customers' facilities. However, as applicable, XNG utilizes and installs all
equipment in compliance with NFPA 52 standards (as described above), and all welding is done
to ANSI/AMSE B31.3 standards. XNG has a full-time Director of Safety and Compliance who
educates and trains first responders in the area of the daughter stations, and creates an approved
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II. PETITION
Section 8.1 of the Department of Public Service's Rules of Procedure states that:
"[d]eclaratory rulings may be issued with respect to (1) the applicability to any person, property,
or state of facts of any rule or statute enforceable by the Commission or the validity of any such
rule."2 XNG respectfully submits that a Declaratory Ruling is appropriate in this case, as XNG
seeks confirmation that, consistent with existing Commission precedent, the Commission does
not have jurisdiction over the Facility and/or the related daughter stations.
Under the Public Service Law ("PSL"), a gas corporation is subject to regulation by the
association, partnership and person ... owning, operating or managing any gas plant ". 3 The
term "gas plant" in turn, is defined to include "real estate, fixtures and personal property
operated, owned, used or to be used for or in connection with or to facilitate the manufacture,
conveying, transportation, distribution, sale or furnishing of gas ... but does not include
property used solely for or in connection with the business of selling, distributing or
furnishing of gas in enclosed containers ". 4 Thus, if an operation is entirely based upon the
be "gas plant," and therefore, the entity undertaking such operation is not a gas corporation
2
16 NYCRR 8.1(a).
3 PSL 2(1 1) (emphasis added).
4
PSL 2(10) (emphasis added).
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The Commission recently addressed this question in a declaratory ruling requested by
Procurement Energy, LLC ("PE"). 5 Procurement Energy proposed to construct and operate a
CNG facility similar to XNG's Facility. In reviewing the facts, the Commission determined that
the tube trailers that will hold and deliver the CNG were "enclosed containers" as that phrase is
used in the definition of "gas plant. " 6 The Commission also stated that the other property PE
planned to use, such as the compressor, will be used solely in connection with the selling,
distributing or furnishing of gas in enclosed containers, and thus concluded that such property
was also excepted from the PSL's definition of "gas plant." 7 Finally, the Commission found that
PE would not be operating any permanent storage facilities in connection with its proposed
concluded that in light of these facts, PE would not be "owning, operating or managing any gas
plant," meaning it would not be a "gas corporation," and thus not subject to the Commission's
jurisdiction. 9
It is respectfully submitted that XNG's operations are materially the same as those
described in the Procurement Energy Declaratory Ruling. XNG will be delivering all of its gas
by enclosed containers on trailers. The other property to be used in connection with its
operations, including compressors, dryers, etc., will all be used solely in connection with the
selling, distributing or furnishing of the gas in the enclosed containers. Piping associated with
XNG's facilities will be limited to the lengths of two taps leading from the Iroquois pipeline to
5 Case No. 13-G -0187, Procurement Energy, LLC, Declaratory Ruling Regarding Jurisdiction (issued August 16,
2013).
6
Id. at4.
Id.
8
Id.
9
Id. at 4-5.
14804380.11
the Facility (less than 195 feet each), all of which is also to be used solely in connection with the
sale and distribution of gas in enclosed containers. Thus, XNG's operations should fall within
the exception to the definition of "gas plant." Since XNG is not operating a "gas plant," XNG
standpoint. As described in detail above, XNG will build its facilities in compliance with
requirements, as well as the New York State Building and Fire Prevention Code, will be
adequate to protect public safety. Those requirements have been used in the propane industry
and at CNG vehicle fueling stations currently operating throughout the State. 10 The Facility will
need to obtain approvals from multiple other state and local agencies, including the Town of
Manheim Planning Board, the Town of Manheim Zoning Board of Appeals, the Town of
Manheim Code Enforcement Officer, the New York State Department of Environmental
Conservation, and the New York State Department of Transportation. The Facility will also be
reviewed under the State Environmental Quality Review Act. The Facility will therefore receive
a thorough environmental and safety review before construction and operation begin.
Rate regulation is also unnecessary, as XNG will not be serving captive ratepayers
without other fuel supply options. XNG will not have the ability to exercise pricing power, due
to the availability of alternate fuels, the varying economics applicable to those fuels, and the
presence in the market of competing CNG suppliers (such as PE). Accordingly, rate regulation
10 According to the Department of Energy, there are 36 CNG vehicle fueling stations in New York State, whose
operations are nearly identical to the proposed operations at the Facility.
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It is respectfully submitted that issuing the requested Declaratory Ruling will further
support New York State's energy policies and the Commission's own goals. The benefits of
substituting natural gas for other existing fuels such as heating oil, kerosene, and propane are
well known. Natural gas is cleaner than those fuels, emitting less particulate matter, nitrous
oxide, sulfur dioxide, and carbon dioxide. Natural gas is also significantly cheaper than heating
New York has long recognized the benefits of expanding natural gas usage. The current
New York State Energy Plan ("State Energy Plan") calls for the expansion of natural gas
infrastructure throughout the State. 12 The 2014 Draft State Energy Plan, issued January 7, 2014
(the "Draft State Energy Plan"), repeated this call for additional natural gas service in the State
one of the 15 initiatives enumerated in the Draft State Energy Plan is to "reduce reliance on
petroleum products for heating buildings by supporting the use of clean alternatives to heating oil
and expanding access to natural gas in the near term ...". 13 The expansion of natural gas service
is also consistent with the Governor's New York Energy Highway `Blueprint. "
14
The Commission has also recognized the benefits associated with increasing the
availability of natural gas within the state. In Case 12-G-0297, 15 the Commission is examining
policies surrounding the expansion of natural gas service. The Commission's Order Instituting
Using 2012-2013 winter season data, the residential price of natural gas was $9.15/MMBtu, while the price of
fuel oil was $37.35/MMBtu. (Calculations made using data and calculators on the U.S. Energy Information
Administration's website at http://www.eia.szov/tools/faqs/faq.cfm?id=8&t=5.)
12 State Energy Plan, at 44.
t3 Draft State Energy Plan, at 43.
14 The Blueprint states that "accelerating utility capital and operation and maintenance spending on the State's ..
natural gas infrastructure will result in enhanced reliability and safety for utility customers while generating
substantial economic development benefits for the State's overall economy." New York Energy Highway
Blueprint, at 14.
15 Case 12-G-0297, Proceeding on Motion of the Commission To Examine Policies Regarding the Expansion of
Natural Gas Service, Order Instituting Proceeding and Establishing Further Procedures (issued November 30,
2012) (the "Natural Gas Expansion Order")
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Proceeding extensively discusses the benefits of natural gas. In reviewing the benefits of natural
gas the Commission stated that "[t]here are many ways the use of natural gas as an alternative to
other fossil fuels could provide benefits to New Yorkers. " 16 The benefits listed and discussed in
some detail in the Order included (a) lower prices, (b) fewer emissions, (c) extending low
income programs, (d) promoting economic development, and (e) enhancing reliability. 17
In sum, the State Energy Planning Board, the Commission, and the Governor's office
have all recognized the benefits of making natural gas more accessible throughout New York.
As discussed below, XNG's proposed Facility will be a positive step in that direction, and the
Commission should encourage its prompt deployment by finding that it is not subject to the
Commission's jurisdiction.
The challenges associated with building natural gas pipelines in certain areas of the State
has made expansion of natural gas service into those areas too costly to pursue. In its Natural
Gas Expansion Order, the Commission acknowledged that CNG facilities could play a role in
bringing natural gas services to those areas, stating that "in [areas of remote, rocky or
mountainous terrain], it may make sense to site a compressed natural gas (CNG) or liquefied
natural gas (LNG) storage facility, which could be used to supply a local distribution system. " 18
CNG facilities like XNG's Facility and the one addressed in the Procurement Energy
Declaratory Ruling (discussed supra) are well-suited to address this issue, and have begun to
make an impact in the markets. Through its facilities in Maine, XNG is currently supplying
customers throughout the Northeast and Canada, as well as in New York. In addition to XNG's
two facilities in Maine and Procurement Energy's proposed facility, NG Advantage has a station
16
Natural Gas Expansion Order, at 2.
17
Id.
18 Natural Gas Expansion Order, at 7.
11
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in Milton, Vermont and is building another in Pembroke, New Hampshire. Global Partners has a
facility in Bangor, Maine. These facilities are bringing long-needed competition to the energy
markets (both in terms of competition with other fuels and competition with each other), which
will bring long-awaited benefits to commercial and industrial customers. XNG's proposed
Adirondacks and Catskills where natural gas distribution infrastructure is unlikely to be installed
XNG's operations can also benefit residential natural gas customers by acting as a
supplier to LDCs until additional delivery infrastructure is built. Certain LDCs have expressed
concern that they do not have access to sufficient gas supplies to serve existing customers at peak
times, or to expand their services. As noted earlier, XNG has a preliminary agreement in place
to alleviate this concern for one LDC that is currently operating under supply constraints.
XNG's facilities will thus help ensure that LDCs will be able to provide continuous services to
their customers in peak conditions, and possibly to extend their infrastructure to new customers.
XNG's proposed operation will have a number of other benefits which satisfy the goals
and initiatives in the Draft State Energy Plan. As noted above, XNG's operations will now allow
industrial and commercial entities another choice for their fuel supply. This will provide a
significant benefit by adding competition to markets where it is currently very limited. The
resource diversity provided by XNG's operations will drive down prices and improve customer
service in areas not currently served by utilities. This helps satisfy two of the five stated goals of
the Draft State Energy Plan (improving energy affordability and giving customers more control
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XNG's operations will also help contribute to infrastructure efficiency and resiliency.
XNG's services will reduce the need for new and costly infrastructure development by providing
natural gas services to locations where developing pipelines would be difficult. As discussed
above, XNG's services can also ensure that LDCs and other customers have an additional source
of fuel supply in the event of disruptions. By ensuring that more areas of the State have reliable
access to natural gas, XNG's services will also enhance New York's reputation as a commercial
center with the ability to offer clean, reliable, cost-effective, and high quality energy services to
businesses of all kinds in all areas. These benefits help satisfy the goal in the Draft State Energy
Plan of providing a more resilient and flexible power grid, and specifically helps address
Initiative 06 ("[u]pdate and modernize electricity and gas delivery systems to replace aging
infrastructure and ensure service quality and reliability with a more integrated and distributed
energy network") and Initiative 07 ([s]upport community-based energy planning ... to develop
In sum, XNG's Facility will provide a substantial benefit to energy customers in the State
of New York, and falls comfortably within the State's stated plans, policies and goals for future
energy development. A ruling from the PSC confirming that it does not have jurisdiction over
these types of facilities (confirming its earlier ruling in the PE Petition) will help facilitate the
development of XNG's Facility and the expansion of natural gas service State-wide.
III. CONCLUSION
For the reasons set forth herein, XNG respectfully requests a declaratory ruling from the
Commission that the CNG facilities proposed by XNG do not constitute "gas plant" within the
19
Draft State Energy Plan, at 40-41.
13
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meaning of the PSL, and therefore, XNG is not a gas corporation subject to Commission
jurisdiction.
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14804380.11
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
VERIFICATION
SETH BERRY, being duly sworn according to law, upon his oath, deposes and
says:
Xpress Natural Gas LLC, and am authorized to make this Verification on behalf of
Petitioner.
2. I have read the contents of the foregoing Petition and hereby verify that the
statements therein contained are true and accurate to the best of my knowledge and
belief.
SETH BERRY
Sworn to and subscribed before me
this 4*'hay of January, 2014
N
otary Public
14840833.1